This specification relates to swaps.
Swaps are financial derivatives in which counterparties to the transactions exchange certain benefits of one party's financial instrument for those of the other party's financial instrument. Two examples of financial swaps are Interest Rate Swaps and Credit Default Swaps. Interest rate swaps are a financial derivative in which one party agrees to pay a fixed interest rate on a notional amount to a second party in exchange for receiving a floating interest rate on a notional amount. Interest rate swaps can be denoted in a single currency or multiple currencies. Credit Default Swaps are a financial derivatives in which one party, who is the buyer of credit protection, makes a series of payments to other party, who is the seller of credit protection, regarding an underlying bond or loan, in exchange for the seller's agreement to make payment on the underlying bond or loan if there is a credit event that causes it to go into default.
Securities can be traded on electronic exchanges. Securities traded over exchanges are standardized to allow for transparent trading. Less standard derivatives are traded in an over-the-counter (OTC) derivatives market. OTC derivatives are currently traded bilaterally between two parties.